Question

Pirate Seafood Company purchases lobsters and processes them into tails and flakes, It sells the lobster tails for $21 per pound and the flakes for $14 per pound. On average, 100 pounds of lobster are processed into 52 pounds of tails and 22 pounds of flakes, with 26 pounds of waste. Assume that the company purchased 2,400 pounds of lobster for $4.50 per pound and processed the lobsters with an additional labor cost of $1,800. No materials or labor costs are assigned to the waste. If 1,096 pounds of tails and 324 pounds of flakes are sold, calculate the allocated cost of the sold items and the allocated cost of the ending inventory. The company allocates joint costs on a value basis. (Round cost per pound answers to 2 decimal places.) Allocated Cost to be Cost 2,400 Cost per Pound Purchase Yield per 2,400 lb. Purchase Market Value Percent of Market Value per 2,400 lb. Purchase Allocated Pound Denominator % of Mkt Value Numerator Lobster Tails Lobster Flakes Totals 1) What is the allocated cost of the sold items? Cost per Pound Cost of Goods Sold Pounds sold Lobster Tails Lobster Flakes Totals 2) What is the allocated cost of the ending inventory? Pounds in Ending Inventory Cost of Cost per Pound Ending Inventory Lobster Tails Lobster Flakes Totals

Answer 1

Solution

1

	Yield per 2400 lb. Purchase	market value per 2400 lb. Purchase	percent of market value			Cost to be allocated	allocated cost 2400 pound purchase	cost per pound
			Numerator	Denominator	% of market value
Lobster tails	1248 (2400*52%)	26208 (1248*21)	26208	33600	78%	12600 [(2400*4.50) +1800)	9828 (12600*78%)	7.88 (9828/1248)
Lobster flakes	528 (2400*22%)	7392 (528*14)	7392	33600	22%	12600	2772 (12600*22%)	5.25 (2772/528)
Waste	624 (2400*26%)
Totals	2400	33600			100%		12600

2.

Allocated cost of sold items:

	Cost per pound	pounds sold	cost of goods sold
Lobster tail	7.88	1096	8636 (1096*7.88)
Lobster flakes	5.25	324	1701 (324*5.25)
Total			10337

3.

Allocated cost of ending inventory:

	Cost per pound	pounds in ending inventory	cost of ending inventory
Lobster tail	7.88	152 (1248-1096)	1196 (152*7.88)
Lobster flakes	5.25	204 (528-324)	1071 (204*5.25)
Total			2269